SBI Life Insurance Company Limited (SBILIFE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the SBI Life Insurance Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Kumar Sharma, MD and CEO; SBI Life Insurance Company. Thank you, and over to you, sir.

Thank you very much. Good afternoon, everyone, and we heartily welcome you all to the results update call of SBI Life Insurance for the year ended March 31, 2021. Hope you are all taking due care of yourselves and also of your family members. Along with me, I have Sangramjit Sarangi, President and CFO; Anand Pejawar, President of IT and IB; Abhijit Gulanikar, President Business Strategy; Subhendu Kumar Bal, Chief Actuary and CRO; Prithesh Chaubey appointed Actuary; and Smita Verma, Senior Vice President, Finance and Investor Relations. Update on our financial results can be accessed on our website as well as on the website of both the stock exchanges. Before I brief you all on the performance highlights, let me [indiscernible] our efforts taken out by all our employees, distribution partners and other business associates, who have worked tirelessly to provide continued support to our customers. Thanks to their efforts, we have delivered a strong performance in this unprecedented conditions. The key highlights of this financial year are New Business Premium registered a growth of 24% and stands at INR 206.2 billion. Renewal premium has shown a growth of 23% and stands at INR 296.3 billion. Gross written premium crossed INR 500 billion mark with a strong growth of 24%. Protection New Business Premium is at INR 24.6 billion, registering 18% Y-o-Y growth. Individual protection New Business Premium grew by 40% to INR 7.4 billion. Annuity business witnessed 169% growth and stands at INR 30.2 billion. Profit after tax stands at INR 14.6 billion. On actual tax rate basis, value of new business is INR 23.3 billion, a growth of 16% Y-o-Y, and VoNB margin is 20.4%, with an improvement of 170 basis points over last year. The Indian Embedded Value stands at INR 333.9 billion, a growth of 27% on actual tax rate basis. Assets under management grew by 38% to INR 2.2 trillion. So now we would update you on each of these elements in detail. The premium business picked up well in the second half of the year, and the company delivered strong growth of 32% in total New Business Premium and 30% in Individual New Business Premium. Last quarter of the year, that is January to March FY '21, the company grew by 63% in total NBP and 53% in individual business. Maintaining private market leadership position in New Business Premium, we collected New Business Premium of INR 206.2 billion and private market share of 21.9%, an improvement of 140 basis points over last year. Individual business has always been a focus area of the company. Individual New Business Premium has grown to INR 124.9 billion, a growth of 11%. Single premium contribution is 20% of Individual New Business Premium. Individual rated New Business Premium stands at INR 102.2 billion, leading to a private market leadership with share of 22.6%. Group New Business Premium marked a Y-o-Y growth of 52% and stands at INR 81.3 billion with private market share of 32.1%. The renewal premium grew by 23% to INR 296.3 billion, which accounts for 59% of the gross written premium. Our gross written premium stands at INR 502.5 billion, a growth of 34%. Annualized Premium Equivalent, APE, stands at INR 114.48 billion. During the period, a total of 16.6 lakh individual new policies were issued, registering a growth of 7% over the previous year. Coming to the product mix. Non-par New Business Premium is INR 110.7 billion with a share of 54% in New Business Premium. Individual protection is at INR 7.4 billion, registering a growth of 40%. Group protection stands at INR 17.2 billion. On APE basis, protection contributes 10% of new business and has registered a growth of 26%. Annuity business is at INR 30.2 billion, a growth of 169% and contributes 15% of New Business Premium. ULIP momentum has picked well quarter 2 onwards and individual ULIP business constitutes 68% on Individual New Business Premiums. Guaranteed non-par sales product is contributing 8% of the individual new business and just 5% of total new business collective. Traditional savings business, including group savings, accounts for 47% of the New Business Premium in this year, registering a growth of 49%. We will continue to grow all profitable lines of business. Now I come to distribution partners. Bancassurance business marked a share of 65% in Individual New Business Premium. Total number of CIS stands at 50,240 as on March 31, 2021. Instant policy protection -- protection policy issuance through YONO app of SBI has covered more than 6.3 lakh lives. Agency channel, another strong channel, contributes 28% in individual business premium. Our total number of agents stands at 170,096 as of March 31, 2021. During the year, other channel direct corporate agents, brokers, online and web aggregators grew by 107% in terms of Individual New Business Premium. Protection New Business Premium through other channels registered growth of 57%. Coming to the company's profitability. The company's profit after tax for the year ended March 31, 2021, stands at INR 14.6 billion as compared to INR 14.2 billion in the previous year ended March 31, 2020, registering a growth of 2%. Our solvency remains strong at 215% as on March 31, 2021. As mentioned in my opening remarks, value of new business is INR 23.3 billion on actual tax rate basis and, on effective tax rate basis, it is INR 26.6 billion. VoNB margin is at 20.4% on actual tax rate basis, an improvement of 170 basis points and on effective tax rate basis, stands at 23.2%, an improvement of 250 basis points. Embedded value stands at INR 364 billion on effective tax rate basis, a growth of 32%, and on actual tax rate basis is INR 333.9 billion with a growth of 27% over last year. Embedded value operating profit stands at INR 50.2 billion and operating return on embedded value is 19.1%. Coming to operational efficiency. Cost efficiencies continue to improve with OpEx ratio reducing from 5.9% in the year ended March 31, 2020, to 4.8% in the year ended March 31, 2021. Our 13-month persistency ratio is at 87.9% as compared to 86.1% last year and 61 -- 61st month persistency is at 61.6% compared to 59.9% in the corresponding period last year. On regular premium basis, 13-month persistency stands at 85.4% vis-à-vis 83.7% in the previous year. As mentioned in my opening remarks, assets under management have crossed INR 2.2 trillion and stand at INR 2,208.7 billion as on March 31, 2021, growth of 38% as compared to March 31, 2020. The company continues efficient use of technology for simplification of processes, with 99% of the individual processes being submitted digitally. 41% of individual proposals are processed through automated underwriting. Customer satisfaction is the key focus area. Our grievances with respect to unfair trade practices stands at 0.06%, one of the lowest in the industry. Our rapid adoption of new online capabilities has helped to maintain business activity. We introduced remote sales completion for all distribution channels and launched online services for customers. We moved our agency recruitment, onboarding and training online. Automation and digitalization have significantly enhanced customer experience, and straight-through processing is now used for close to 1/3 of the business. Resurgence of COVID-19 pandemic has led to more reliance on digitalization and automation. We continue to focus on strengthening of our digital services and automation for providing uninterrupted services to our valued customers during these challenging times. Our continuous effort is on value enhancement for all our stakeholders by maintaining sustainable and consistent product mix, increasing the market share of protection business along with other profitable line of business, enhance distribution network and their capability to reach out to customers in an efficient manner and for improving customer satisfaction. So thank you very much. We are now happy to take any questions that you may have.

[Operator Instructions] The first question is from the line of [ Arav Sangai ] from VT Capital.

So I have 3 questions. My first question is on the VNB margins. So if I look at the VNB margin book, there seems to be a negative variance in the margins -- in the change in margins. So I wanted to understand even the persistencies and cost ratios have improved dramatically. So is this margin negative only because of the change in mortality assumption? Or is there anything else in the margin change? My second question is on the margin difference between statutory tax rate and the effective tax rate. So that seems to have gone up a lot in this quarter. So any color on that? And last question is on the growth outlook for the next year that given ULIPs are coming back a lot, how are we thinking about restricting ULIP in our mix? Because then again, our margins might be affected. So those are the 3 questions.

Yes. So on the VNB margin, the negative variance on operating assumptions is only on account of mortality, change in mortality. So that is the first one. The second is on effective and actual tax rate basis. So there is a difference. And this -- we'll have to actually -- the actual tax rate is at 14.5%. And the effective tax rate is calculated taking into account all the other things like the dividend tax and various things like that. So it actually comes out to that. So it's an actual calculation. So if you see that there is a difference, which is higher than what it used to be, say, last year. But yes, that is how it is. It is an actual figure. Then if you look at the growth outlook for ULIP, we see that it is -- there was a lot of talk about ULIPs not being in demand. So last year, the first quarter, there was a visible lack of demand there. But after that, it has picked up, and I think we are almost where we were the year before that or even years before that. So I think that there is a real need for the customers for this product. This is a very, very important -- what you call it, a very important component of people's savings, and the life insurance that goes along with it is, I think, a very, very good product for people. And people, who are not really keen on going directly into the equity market, but would like to have some kind of protection along with this investment. So that demand has not faded away. And in fact, we find that the demand is as robust as before. So we have absolutely no plans of withdrawing this product or pushing people away from the product or anything. But having said that, we offer a huge bouquet of products to our customers, and we generally go by what the customer demands.

[Operator Instructions] The next question is from the line of Deepika Mundra from JPMorgan.

Sir, just 2 questions from my side. Firstly, on the new banca partnership. They seem to be doing pretty well. I just wanted to get an understanding as to what is the activation level of 12,000-odd branches that you all have added. So in the sense as to how many of these would already be contributing to business? And secondly, if I'm not mistaken, I think the group protection volume is marginally down. Could you talk a little bit about that?

So just to take the question on banca. At the moment, of course, it varies from partner to partner. But there is a long way to go in activation of those branches. We are where we were with SBI many years ago. So there is a significant road map ahead even though, as you said, we have done already with other banks.

Grown by 40%. So group protection has actually grown. One second. So group protection has grown by 65%. I don't know which figures you are looking at. Are you on the line?

Deepika? Do you have more questions?

Sir, I was mentioning for the quarter, I think, there is some just slowdown in group protection.

Yes, for the quarter, yes, there is.

So Deepika, actually, we have maintained our numbers according to the projected for this financial year quarter-on-quarter. And the major part of the group protection has been done in the first 3 quarters. And the last quarter also, we grew by 16%. And as far as the overall year-on-year basis is concerned, 65% growth. So that we maintained. And individual protection also we grew by 40%. And on quarter-on-quarter basis, also 49%. So that as per the plan, it has been maintained.

The next question is from the line of Ajox Frederick from B&K Securities.

Sir, again, just to continue on the group protection piece. I am looking at the APE numbers and, of course, versus peers, who have done really well in 4Q, we were not able to do that much well on group side. Of course, on the retail side, we're doing very well. So I have 2 questions. One is, I mean, in future, so where do we stand with respect to group protection? And number two is, on retail protection, are we being slightly more aggressive in current uncertain times? Those are my 2 questions on protection.

So I'll take your second question first. On protection, we are not taking an aggressive line or anything. We are going by the customer demand. So wherever we see -- and as you can very well know that last year, there has been a focus on protection. So protection was in slightly higher demand, and we have catered to the requirements of the customers. So protection has been sold more last year as a result of customer demand, I should say. We are not -- we keep maintaining -- I think earlier also, I've said, we do not push any product to any customer. We have a big range of products to suit each and every customer. And we offer these products, and we sell whatever products the customer chooses. Now coming to the first part. Sangram, can you?

Yes. Just to give you the bifurcation between the group protection, we have got 2 lines. One is Credit Life, and second one is other than Credit Life. So Credit Life grew in the quarter 4 by 27% and Y-o-Y by 2%.

On APE, right?

APE.

This is on APE. And group protection, other than Credit Life, on quarter-on-quarter, fourth quarter, it grew by 16% and on the Y-o-Y, it is 65% on NBP basis. And on APE basis, in fact, on Y-o-Y, it is 8% growth.

Okay, sir. That was very helpful. If I can just like nudge in one more question on that effective tax rate again. So we saw our effective tax rate margins going up by 60 bps, if I see only 4Q versus 4Q, whereas the mix is not very much different of course. Non-par has gone up, but protection has come down versus 4Q last year. So what -- how should I read this? Because last fourth quarter, we had 21.1%, this time is 27.7% on effective tax rate margins.

So basically, we generally declare our VNB and everything on actual tax rate basis. But what we do -- what we have done is we have done -- calculated this on effective tax rate basis as is being done by everybody else in the industry. Just to give a comparison. Every time there is this question of why our margins are much lower. So that is why we calculated it on the same terms that our -- the industry -- rest of the industry is calculating. That is how it comes to this much.

But usually, when the dividend is not paid, that time, the effective tax rate should worsen, right, or get closer to the actual tax rate. So can you just let me, like last -- of course, if you can, on last year's basis, what was effective tax rate and FY '21, what was the effective tax rate?

Yes. See, simple terms, what we have done this time is that the effective tax rate calculation, we brought it in line with the industry practice. And the whole assumptions and the methodology what is being used by the industry, we have applied that in our calculation. And this is the derivative of this outcome. So we will continue to do that. But as earlier said, we will continue to declare both, actual tax basis as well as effective tax rate basis. So that at least you will get a clear picture and a comparison with the peer group also.

The next question is from the line of Madhukar Ladha from Elara Capital.

Congratulations on a good set of numbers. My first question is, see, our protection share on non-par share, actually more non-par share is much lower than some of the other competitors in the industry. So any sort of steps that you are taking to increase non-par in the mix? So that is actually value or margin accretive, right? So how do we see this mix moving into FY '22, FY '23? That's number one. And number two, sir, what is your view on any protection rate hike? I also remember that your new product approval was due in the last quarter of FY '21. Has that come through? And what sort of price hikes, if any, have you done or are expected to do now?

Yes. So as far as non-par is concerned, if you see, we have grown non-par at about 50% last year. So I don't think we are -- so again, let me come back to the statement I keep repeating. We don't push any product down the throat of any customer. We sell only products, which are demanded by customers. We have all the products. And therefore, there is no way we are holding back on a product or pushing a product. What we do have is, part of your second question, where we can price and reprice. So sometimes when we find that the product is selling more because there are -- we are -- we could likely make a loss or something, then we would reprice the product. But that would be -- that I'll answer on the protection side, what you asked me. But if you ask me, I do not push non-par products, nor do I withdraw any product or keep it in -- keep it from my customers. Having said that, our -- we have a bouquet of 38 products covering virtually every requirement by anybody. And we have a very strong non-par individual product called Smart Platina Assure. So that was very much in demand last year, and we have been able to sell that in large numbers. So we do not propose to push this product any further or anything like that, nor do we propose to withdraw it or anything. And coming to protection rate hike, yes. So we have actually repriced one product, and we are launching it today? It has been launched today. So there has been a hike in one of our products, Smart Shield. And then the product that you are talking about which we were supposed to launch, we already have a product in that area. But what -- we had to delay that because we had a lot of statutory products which we launched in the meantime. So we came out with -- last year, if you ask, the IRDAI-mandated products, we brought out Corona Rakshak, then we got Saral Jeevan Bima -- Saral Bima and we also got -- we have filed for the pension product. So now this one, this product, yes -- and apart from that, we also had the repricing of the Smart Platina. And then we also launched Poorna Suraksha. That is a health-cum-critical illness-cum-like cover. So that was what we were busy with. And as a result of this, we had to reprioritize, but this year, definitely in the first quarter, we are likely to come up with the product that we were talking about earlier also. So that also is likely to come. But in the meantime, we already have protection products in the market, which are -- which have strong uptick, as you can see.

So what is the price hike that you have taken in Smart Shield? And do you expect another round of reinsurance rate hikes?

See, reinsurance, I don't know what they will do. And it will depend a lot on the experience and what we -- their own experience and their experience with us. So it will depend a lot on that. So I will not crystal ball gaze on that. But what I can say is that the...

What is the price hike in our product?

Yes. No, no, Saral Shield, if you ask me, it is age-wise and tenure-wise, there is a chart. So if you ask me on an average, around 10%, let's say.

The next question is from the line of Ansuman Deb from ICICI Securities.

My question was regarding our 61st month persistency on the regular premium side. So it has declined, I think. So if you could give some reasons for that? And second question was on protection. So do you believe the new product, which is you are talking about, can drive some new volumes in this FY '22? Or do you believe it would be the -- it will not be any special kind of a volume trigger?

Yes. So the new products, definitely, we expect that some volumes will go up. That -- because it's -- what we are bringing out will be complementing our suite of products. So obviously, we will be able to find more people, who will be interested in buying these products. And...

It will be a pure term product, right? It will not be an ROP, but a pure term product, right?

Yes, it will be a pure term product. Absolutely. So that -- this is something which we will -- we are -- like I said, we already have a lot of protection products and even pure protection products, we already have, but this will complement that suite. Okay. And as far as the 61st month persistency, Sangram, can you just highlight that?

See, generally, the regular premium paying products, there are a few products got mature after the fifth year. So that is the reason the bucket, as far as the regular premium is concerned, that also got a little hit. So there is a small dip in the regular premium basis. But if you see overall, all premiums taken together, that is a -- there is a growth and which is beyond now 61.6%, so which is the -- one of the best in the industry.

Right, right. And sir -- got it, sir. And one last question, sir, regarding the increase in the margins that we have seen in Q4, so we had some positive operating assumptions, which were supposed to unwind this quarter. So is it -- has it contributed to this kind of a higher increase in Q4?

[indiscernible] No, no, that's not true. If we see this -- margin growth is mainly on account of the active management of the products, balanced product, both for the protection side as well as non-par side. We have been doing this active repricing and other things and optimizing. So even now within the same proportion, market margin increased. So margin contribution is mainly on account of the product mix.

Right. But we would have started some assumptions on this -- when we started this year because of COVID. We would have made some assumptions and, throughout the year, the experience would have been positive and some contribution would have come from there?

So we have revisited those assumptions. And partially, we have managed that. And COVID is still around -- and we at SBI Life, we wanted to be prudent on that side. So we are carrying some part of that.

Got it. Any mortality reserves that we have additionally made?

Yes. So being prudent, we did 2 aspects. One aspect is that we have given [indiscernible] for next year, given uncertainty. Though our COVID claim is very comfortable, we were within that. On topup, we have also made additional provision of INR 183 crores for the COVID as on 31st March '21.

INR 183 crore, right, sir?

Yes. INR 183 crores.

INR 183 crores.

The next question is from the line of Adarsh Parasrampuria from CLSA.

Sir, congratulations on strong numbers. So just looking through your operating variances over the last 2 years, it's been a very big positive. Especially if I try and look at the breakup, it comes more on the persistency side? It's [indiscernible] [ INR 330 crores ] last year, INR 320 crores this year. And then there is an other line. So 2 questions here is one, given that our persistencies have continued to improve on a headline basis when you can talk about product-wise, do you feel the need to now tinker with it and make it a part of margin because it's been a very strong persistency variances for 2 years now? And two on the other variances, what's the INR 280 crore of other variances if you can talk about?

Just see that when you check the assumption for future, we are not only looking at the current experience, we're looking at the long-term emerging experience. So partially, you need to look into. Second part is though persistency is very sound, and you see the COVID scenario, we just want to maintain that. We want to be extra cautious on that side so that -- and you see this variance will keep coming next year as well. And once we see this experience is very credible, we'll go and update our persistency assumption for margin as well as embedded value.

The reason why I'm asking is that we had an equally difficult last year, right, in terms of business being difficult in the first year and having a lot of logistic issues there. In spite of that, you've got whatever variances. So you are saying that maybe this year as well, we look into it. And second half, there could be a possibility of getting some of this in the margins?

Yes.

But not necessarily in the second half or anything, but then yes...

As and when situation emerge, we will do that.

Yes, we'll definitely look at the situation on an ongoing basis.

Got it, sir. And sir, second question is on the margins, right? So you are at, let's say, the comparable margin is 23% versus peers. Can you just talk a little bit about -- give some -- earlier you used to do it, some of your peers do it, give a breakdown between protection and savings? And given that the savings business, you are still ULIP-heavy versus a lot of the peers more non-par saving, how much headroom we have there? And how much of a margin lever that can be? Because your margins now are relatively more comparable to peers, and your non-par mix is quite low. So in that sense, that could end up being a kicker over the next couple of years.

So we've had this mix -- relatively similar mix over the years. And if you see our margins, we have been improving steadily on our margins. So every quarter, every year, our margins are getting better and better. And we are doing it on a sustainable basis. So like Pritesh has already said, the pricing, repricing being dynamic about the whole thing, not trying to push any particular product, meaning what the customer chooses, that kind of strategy has worked for us very well. And we do not think that we need to actually go all out to sell some particular product, which has a higher margin or something. So the other question of your margin breakup comes up. We wouldn't like to actually comment on figures because we have -- even if you ask me, the protection products that we have, so suppose I have 4 pure protection products, the margins will all be different for them. I can only say that the protection products, margins are going to be higher. And the ULIP products, as you all know, the budgets are going to be lower. And the traditional products are somewhere in between. So -- and that's the whole thing. But we are not looking again -- let me emphasize we are not looking to push any particular product to push up our margins. We successfully sell more to more customers, and that gives us our edge and our profits and our growth. And I do not think that you tamper with the winning team.

Adarsh, just to add to what our MD said is, see, you should look at what is our VoNB growth and the EV growth with whatever strategies we have adopted, and this year, we've also faced a little bit challenge on the volume because of the industry circumstances, we still managed to grow VoNB very healthily. So that fact that we have a reasonable margin even in the low margin products helps us meet customer demand and show sustainable but strong increase in VoNB year-on-year.

Got it. And just a related question, right, when IPO happened just a couple of years after that, we had a steady margin improvement story, then protection came in and now non-par savings, and margins improved from that 17%, 18% number to 23%. Any sense and direction, given that we still have some low-hanging fruits, if I can so call it on the non-par side? Any sense on what one should expect from here on because the improvement in the last 2 years has been very strong?

We will continue. I would like to -- it may sound very boring. So the whole of last year, I kept saying this. And we will continue to sell products that the customer wants. And as Abhijit has said very clearly, you can see from our VoNB growth, you can see from our EV growth that our strategy has been working very well for our company. We are #1 in a [indiscernible] of parameters that you see across the industry. So I think we don't tamper with that winning formula, keeping the customer at the center, selling products that he wants and then only adjusting things, which go probably not in our control.

The next question is from the line of Hitesh Gulati from Haitong Securities.

Congratulations on a very good set of numbers. My first question is, what is the new business strain for the quarter -- for the year?

So new business, we have done a lot of new business, so there is a strain, but I don't think we want to quantify that right now.

Okay. And sir, what is the quantum of mortality claims due to COVID that we have paid both on a gross and net basis?

Yes. So if you ask me the total claims that we have paid is INR 320 crores. So this is the net claims, net of reinsurance. And yes, so that's it.

And sir, what could be the number of claims that this INR 320 crores is amounting for?

5,000.

Yes, 5,000 something.

It's 5,076.

I can give you the exact number if you want, 5,076. Yes.

Yes. Okay. And sir, just one last question. Your operating assumption change is minus INR 80 crores. So this is obviously including that INR 183 crore of mortality. There is a positive also of INR 100 crores. So what is that amounting to?

[indiscernible] No, no. It is with 183 crore INR is on top of the additional provision we made on COVID. Assumptions, as I mentioned earlier as well, we wanted to be more prudent on site. In the -- though our COVID claim is well within that, we wanted to be. And so we increased our mortality assumption, also gave the mortality SOPs for the next 1 year. In case situation will worsen, we will be in a much stronger position.

The next question is from the line of Harshit Toshniwal from PremjiInvest.

Am I audible, sir?

Very much so. Go ahead.

Yes. So 2 questions, sir, on the mortality piece. I think clearly, demand is there from customer end, and that is not questionable. But when we talk to peers, the common concern is banks. Right now, it is a critical time, and that's why they are precautious in terms of selling a lot of protection policies. So more from the risk perspective rather than ability or demand perspective, do you think that being aggressive on term protection right now makes sense, given the risk that the mortality claims can be very high if things don't go array? And second, on -- I think in the last question, you mentioned that we had INR 320 crore of claims. So that is for the full year. And just want to know that what is the absolute amount of gross and net claims for the full year because INR 320 crores looks very low versus many of the peers.

No, this is -- INR 320 crores is the net claims -- COVID claims that we have for the year. That's all.

And overall mortality claims, if I just say COVID, non-COVID all together, for the whole year, how much would be the claim, sir?

Total debt claim was around INR 3,017 crores.

[indiscernible]

So it has grown by INR 3,017 crores. It has grown by around 70%.

70%?

74%, yes.

So over there, I just want to understand, sir, that this, obviously, of that INR 3,000 crores, maybe INR 320 crores was because of COVID, but the non-COVID Y-o-Y increase in claims, that also appears to be very high. Even if I split that 10%, then also we have 50%, 60% Y-o-Y growth in the mortality claims versus vis-à-vis much lower term protection growth Y-o-Y. So I just want to understand that -- yes.

Yes. So one of the things is that we have been growing in number of policies sold, okay? So over the last few years, we have been -- every year, we have been growing the number of policies that we are selling. So the claims will naturally grow to that extent. That is the first thing. Secondly, yes, there have been -- there has been a slight increase in the number of claims in the last one year apart from COVID. And this could be related to the pandemic, it may not be related, we do not know. But then there has been an increase in the number of claims there. But having said that, our estimation of the claims that -- and the assumptions that we had made in last year, I think that has come out very, very close to our actual experience. So I think to answer your question, even though there has been a spike in the number of claims, it has been -- this is something which we had estimated.

Just one additional data point, if I can ask, of the INR 3,200 crore claim, which we had paid, what was our initial year capital? What was our initial assumption?

No, no. See, Harshit, this is the total claim paid. And what we mentioned that, and you can see our disclosure as well, our mortality variance is hardly negative. It is INR 20 crores. So this itself indicates that our assumptions are closer to the number. That's what MD has also explained to you.

Sure. And the INR 180 crores, where has that got accounted for? I just missed in the last question?

This is the provisions we made.

It's a provision. We've made a provision of that.

So it will not -- so in the EV, I'm just trying to understand that, where will that reflect -- or it will not reflect right now?

EV is a part of the stated liability. Okay. It is part of the liability unwind. So it is reflected to some extent in the VIFs and ANW, both the sides. Secondly, as I already mentioned, we have also given the SOP in our assumption for 1 more year. So if you consider both the aspects, I think our assumption is well within the -- quite prudent in the current schedule as well. And we expect that we will get a positive variance next year as well on mortality.

So basically, it's implied in the VNB only. There is no separate -- it's there in the VNB calculation itself. It's the simpler way to call. Yes. Okay. One more question, if I may ask you that in the April month, how have the initial trends been? So because of COVID, do you think that impact on us will be very much similar to last year when there was very -- maybe sometime around May and June, where there was a partial lockdown? Or you think that we are right now well equipped digitally and within the bank that our growth won't be impacted that much because of April month?

No, I would hate to try to be an astrologer. So I will not try to crystal ball gaze. So I'll leave it at saying that we are looking at the situation, and we will take our business targets, looking at what we know right now. If you look at both the sides, there have been some lockdowns now, and there is a vaccine out there. And there is a huge program of vaccination going on. So putting all those things together, we will take our own call on this. But I wouldn't like to forecast anything at all right now.

The next question is from the line of Abhishek Saraf from Jefferies.

Most of my questions have been answered. So I just wanted to know your view on the non-par savings product now that we have grown it very fast, and of course, the yield curve -- steep yield curve has helped us to write a lot of this product. But going forward, do you see a similar kind of pace continuing in the next year? And in this regard, I also wanted to understand that in the VNB margin, we have taken negative economic assumption change -- effect, and that seems to be primarily on account of change in risk-free rates. So are we assuming higher rates here? And what would that imply for our -- for the yield curve and our growth in non-par savings for the guaranteed product?

Yes. So basically, non-par, we don't look to push the product or [indiscernible] okay? So right now this has become a very old statement of mine. We don't push any product to the customer. We have all the products. And we -- wherever the customer demands and, like last year, you will know that guaranteed products was part of the flavor of the season during the earlier days of the pandemic. So I think a lot of non-par guaranteed product got sold at that point of time. And that, if it plays itself again, we are ready. For that, we are okay with selling more of that product also. Because finally, it is a question of what the customer is looking for at that point of time. And so that is how we will look at. And the -- like you said, rightly, the change in the economic assumption is because of the risk-free rate change. That's all.

Just if you can dwell a bit on -- sorry for belaboring on this. So what I'm trying to understand is that obviously, at the lower rates, there will be demand for non-par savings. But if we are assuming that the yield curve could probably flatten, so would that make writing guaranteed products profitable for us? Or will that lower the margin? So that's what just I wanted to understand. Maybe you can continue with the growth, but could the margins on non-par savings come down with contraction in yield curve?

So Abhishek, just to give the brief to you. See, this is entirely the yield curve impact for economic assumption, nothing else. Now negative economic assumption doesn't mean that margin is negative or lower. What we do that, we effectively, monitor our margins. And at some point in time, we're not going to keep daily basis changing your pricing. And so the priority is there. If you look into despite this 1% impact on the margin, our margin has significantly grown over the year. This really indicates that the non-par products that we are selling today has a very significant margin. And if margin will continue to be there, we will continue to sell this product. As our MD also mentioned several times that we don't push any specific product, it's depending on the customer trials. What we do, just to lock in our margin and enhance the margin. We continuously monitor the premium rates and try to reprice those products effectively, so that our margin gets intact.

The next question is from the line of Sanketh Godha from Spark Capital.

Sir, this question was asked on the operating variance number of INR 380 crores, others coming from. So just wanted to know the number looks to be a little higher in the current year. What contributes to the INR 380 crores? That's my first question. And second question is that COVID results, we made a provisioning of around INR 70 crores last year. So INR 183 crores is an outstanding number. So it's an incremental provisioning of INR 110 crores. Therefore it has been routed through embedded value. That's my second question. And third one is, if you can give EV breakup into A&W and VIF, it will be useful.

So Sanketh, first question -- I will take the last question one and firstly, that we normally don't disclose this bifurcation of A&W and VIF. We can say that our EV has grown 27%. That itself indicates that how we are performing. Second part, on your what is?

COVID reserve.

So last year, COVID reserve was INR 60 crores.

INR 70 crores.

INR 70 crores as on...

December.

December. And this is the additional provision we have made as on rate. So when we make the provision, we look into the as on valuation rate. So INR 183 crore is the provision rate as 31st March '21. This is second. Third point, you are looking for the operating -- third question on the other operating variance. This is on mainly on the CRM and some type of provision other parts. And there's some smaller things -- if you look in to our EV side, this amount is not significant.

Okay. So have you changed your capital charge assumption from 5 percentage to 4 percentage, and therefore, you are seeing that operating variance for others to come at higher, CRMs and all?

No, no, we have not changed anything. So we have not changed anything.

Okay. Okay. Okay. So basically, to clarify the balance sheet number. So INR 183 crores is the floor number of the current year, right? So it is a total provisioning what you made for COVID is around on INR 250-odd crores. That's the way I should look at? Or INR 183 crores...

No, no. Last time provision has gone. So that goes away the new P&L and the new balance sheet, the old provisions disappear. Because it doesn't matter whether you call it, whether you paid it out of the provision or you paid it out of your P&L and kept that provision into this provision. So it doesn't really matter. So INR 183 crores [Foreign Language] But then finally, the accounting is the same. So right now, the COVID reserve that is made is INR 183 crores.

Liability is there on balance sheet, I mean. So it's on balance sheet.

Got it. Sir then the operating assumption change of INR 80 crores in the EV box is with respect to what? INR 80 crores, what you have made in operating assumption change. It is largely to factor in these additional provisions, what we have made of INR 183 crores...

No, no, no. That is a separate mortality -- it is a change in our mortality assumptions. So we have -- what we have done is we have taken a higher mortality assumption for the year going ahead. So we have said that there will be more claims, death claims to the extent of INR 80 crores. And so that has already been factored into the VoNB movement. And then we have an extra provision of INR 183 crores. Just in case, we fall short, and we -- there are more claims than we -- than our enhanced assumptions, then we want to be safe because this is a year where we -- last year, we made a provision of INR 70 crores, and it turned out pretty much okay. So we just thought that we will enhance that assumption by that amount and slightly more to account for the enhanced maintained business also. And then later, we also kept the COVID reserve because the COVID reserve is something, which really works psychologically also very well.

Got it, sir. Sir, my next question is on annuity business. So we have done a phenomenal job in the current year. We have done around INR 3,000 crores of business in annuity compared to INR 1,100 crores last year. Sir, just wanted to understand this business is largely -- is driven by individual annuity? Or if you can give this breakup into individual and group annuity? That's one point. And how do you see this growth panning out going ahead? Because is it largely coming from our old superannuation fund or your NPS, which is from a sister concern is also driving this growth of annuity business? And how do you foresee the growth going ahead?

It's part everything. So we have amounts coming in from customers, then we have coming -- it is from individual also. So I would say it's like it's about a 50-50 kind of thing from individuals and from corporate business and also NPS. So it's -- all altogether, it is INR 3,000 crores. So that growth, it is a reflection of the demand for -- partly it is a reflection of the increased demand for annuity products, I should say. There is definitely a trend towards more people picking up annuity.

Next question is from the line of Jayant K from Crédit Suisse.

Congratulations on a good set of numbers. I wanted to ask on the hike that was taken 10%. So does this protect our margins? I mean of the total hike that came out from the reinsurers, were we able to pass through the hike entirely? And second question is, can you just tell the protection share in VNB this year?

So the reinsurance rate has nothing to do with that 10%. There is no correlation between that. There were some -- the whole thing, along with the reinsurance rates, we decided to reprice the product. So in that repricing, the final result would be on an average 10% across that particular product. So it has got nothing to do with the exact hike in the reinsurance rates, et cetera. So we wouldn't like to go into that because each product has got a different negotiation going with the reinsurer, and there are different assumptions. Even for us, with the same reinsurers, we would have different reinsurance rates for different products depending on the constituents of the -- who are taking those products. So there is no direct correlation.

Okay. And sir, if I may, just add on to that. So for example, this year, our COVID -- I mean mortality claims are almost 60% higher. I'm guessing some of that would be because you've written a lot of protection business in the last couple of years. Does this mean that this has not been accounting -- accounted for in the last round of reinsurance rate hikes and going ahead, we should expect sharper hike?

I don't know. We didn't do any such -- I mean we haven't seen any such correlation. It is not related to the protection business or anything. Like I said, there has been growth in business over the last few years also. So claims have gone up. And also, the mortality, I think, across the board, people would have felt more death claims last year than in a normal year. So that -- I think that is just that. So I don't think we have seen any such correlation.

Just the protection share in VNB this year?

The protection share in?

VNB.

I can't really. We wouldn't like to state any numbers over there.

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just the first one on the banca. I think for the quarter, on an APE basis, we started seeing good growth. And I think at the start of your comments, you also talked about other channels, including direct other banks and stuff growing. So just wanted to know the sustainability of this, just from the backdrop of systemic liquidity. Do you think these channels can actually grow through next year? I think that's the question.

Yes. So the channels will grow over the next year. So if you see we have a very good partnership going with SBI. So that's the first one that we have. And if you see the way the activity levels in SBI have grown and the amount of business that is being done through SBI, so that gives us an indication of the kind of potential that all these other banks hold. So that would be definitely growing going forward.

Sir, just in terms of the penetration of just say, the SBI, is there some metrics that you would like to share in terms of -- so we have reached 10% of the bank's customers. Is there something that we can look to say, and this is part of the ecosystem that we can hope to achieve over the years?

[Foreign Language] We don't look at it that way. What we do look at is how we can have products, which will be in demand by the customers, how we can help the bank to service those customers -- sell to those customers first and then service those customers with those products. So whatever is a very good mix for the customer, the bank and our company, that kind of thing we do. So -- and it has been growing over the years. If you see, the absolute numbers have been growing steadily. A blip here or there because of -- like COVID. So we still were able to grow, but then it was not a spectacular number in terms of what we could probably do in a normal year, but we still managed to grow very well. So that is the kind of thing that we would like to continue with. It's a winning formula. And we would like to go with that.

Got it, sir. And my last question is on the OpEx ratio. Actually, you called it out at about 4.8%. Is there any physical floor to this number in terms of can this grow further lower? Or do you think we kind of reached some kind of a bottom there?

Yes, probably. I don't know because I don't think we've seen this kind of number in any other company anywhere else. So maybe we are somewhere near the floor. But I really don't know. So we will continue to optimize costs. We will try to build in efficiencies. And if it goes further down, well, we'll know that the floor is not yet reached. But yes, what you are saying is true, it is a very low number. And we don't really want to push it by bringing down costs just like that, just to achieve a different kind of number or something. But then we will definitely look to optimize our costs and try to see where we can bring in more efficiencies.

The next question is from the line of Nischint Chawathe from Kotak Securities Limited.

Most of my questions have been answered. But I was just wondering, this INR 182 crores, the reserve that you have created, I was just wondering if I can see that number anywhere in the EV walk or in the financials?

It is there in the financials. 1 second.

As a part of the reserve.

It is part of the liability, and it is specifically disclosed also part of the financials as a no-show accounts.

The other thing was the mortality, the relative variance on mortality morbidity of INR 20 crores, that is purely what? That is because of COVID? Or that is -- is that the adverse experience of last year?

See, this is mainly on the account of the COVID. That's it. If COVID would not be there, we would have been seeing the very positive mortality variance as well.

And incrementally, given the fact that you've kind of created more reserves now, you would probably say that, I mean, maybe you'd probably be more comfortable at these levels is that what one can be? Or would you see more changes happening during the course of the year?

No. Like we mentioned that, we have made the additional provision for the COVID. And in addition to that, we also have taken the prudent assumption for the mortality in our assumption. So we are very comfortable on this side.

One last question was, there was a change in unwinding rate, and this was reflecting lower interest rates? Or what is the reason?

Yes, it is totally on account of the effect in the current interest rate.

Last year, you had not changed the rate. And I think the argument that you have given last time around was that you would make the assumption -- make the adjustment through the economic assumption change line item. So maybe I can sort of maybe read that change in the thought process at this point of time. Is that the way we can read it? Because your unwinding rate for the previous 3 years has been consistent at 8.5%.

So see, some point in time, you have to keep revisiting your economic rate, unwinding that in view of the economic environment. And that's why we say the this is more appropriate to revise. That's why we revised it.

The next question is from the line of Manish Shukla from Citi Group.

For the individual protection business, could you give the ticket size in terms of sum assured per policy for FY '21, FY '22 -- '20?

We will give you later as far as the sum assured is concerned. So average ticket size is in the range of around INR 22,000 to INR 25,000.

What would that have been in FY '20?

That, I will come back to you.

Okay. All right. The second question is what was the share of ROP in individual protection for FY '21 and FY '20?

Both for last year and this year, it is the same range. So around 84%, 85% ROP. Non-ROP is around 15% to 16%.

Okay. Understood. Last question in terms of channel mix, when you show banca, that is only SBI, right?

Yes. Yes. Yes.

And all other banks are part of others?

Yes.

So the new bank partnerships that you entered into, I'm assuming you would be selling the entire suite of products across all banks, including Credit Protect and everything, right?

Yes, that is the general idea. It depends also on the bank and their comfort with various products. So it will depend a lot on what we agree with the bank to sell.

The next question is from the line of Sonal Minhas from Prescient Capital.

This is Sonal. Am I audible?

Yes, sir, we can hear you.

Yes. Go ahead.

Yes. Okay. Sir, just one question on the new business [indiscernible]. I just wanted to understand the sustainability of these margins. There's an outlook of next 1 to 2 years because we've seen a significant bump in this year. So just wanted to understand how does this add up. And is there a guidance you would want to give for the next 1 or 2 years outlook on this? That's about it.

Yes. So I said earlier also, if you look at the trend in the last 4, 5 years, quarter-on-quarter, year-on-year, we have been improving our VNB margin. So we are very happy doing that. And if you ask me what it will be going ahead, we'll keep doing the things right. We will try to do the same things better and better. And like we said repricing when there is an issue somewhere or trying to have more products where there is a demand, so that kind of thing, we'll continue to do. And we are very hopeful, and the history will [indiscernible] that we will -- we have been able to steadily increase the VNB and the VNB margin. So we hope that it will continue.

Okay. Sir, just asking more from the boundary analysis condition that if you see a significant [indiscernible] growth in the ULIP business going further or -- so just asking, this is a significant bump in this particular year. Year-on-year, otherwise, I think it's been growing by a lesser amount. So that's why I was concerned about the sustainability of the numbers. So I understand there is a quarter-on-quarter increase in the VNB margin. But this year, it's a little higher. That's why I was curious about that.

Yes. So if you look at the actual tax rate, this -- it is a very steady kind of curve. It is not -- it is a slightly higher number this year, definitely, because we've had a very good performance this year. But if you look at it, it's not very significantly different. But if you look at the effective tax rate, this is probably -- there is a huge bump. And that, as Sangram has already explained, because now this was probably the first time that we calculated on the effective tax rate basis, the way it is being done by the...

[indiscernible]

Yes. That was probably the reason why it looks slightly different. But I think...

I think earlier, it used to be like apple-to-oranges comparison. That's the reason...

Yes, yes, yes. So we had this unfair comparison for a long time. And that is why we decided to provide that comparison. We still report on an actual tax rate basis.

Okay. All right. And sir, just understanding from an internal control perspective, we see that the return on equity and the [indiscernible] actually been dipping year-on-year. I just want to understand from a sustainability part, again, the same bit that over the course of next 2, 3 years, as the margins improve, the VNB margins, do you see the business actually recovering its return on equity as we see the shareholder -- the contribution to the shareholders actually growing over the course of net 2, 3 years?

We will not be focusing on shareholder making -- I mean growing the shareholder value or something. It will grow as a result of the increase in the business that we are doing. And like I said, stable, sustainable policies, stable, sustainable pricing will always win the day, any day.

We take the last question from the line of Harshit Toshniwal from PremjiInvest.

Just one last one, sir. So you said that you have changed the methodology for the effective tax rate versus what it used to be out there to make it in line with that. Can you throw some light on what that changes are? And I think, finally, a great set of numbers. So this has been one of the best quarters we have had.

We can provide you the calculations off-line. We can send it across to you. We will note it down, and we will...

Okay. Sure, sure. Just want to understand that broadly theoretically, what has changed. But anyways, I'll take it off-line.

Thank you very much.

Thank you. That was the last question. I would now like to hand the conference over to Mr. Mahesh Kumar Sharma for closing comments.

Yes. So thank you very much. We really appreciate your time and your patience in going through all our financials and all the questions that you asked, which make us want to work harder and do better and all the pointers that we get on where we can do things better. So thanks a lot, and we hope to -- hope that all of you will be safe and sound with this pandemic going. So please wear your masks and sanitize yourself, hands -- washing hands and keeping social distance. Thanks a lot for attending our call. Good night.

Thank you.

Thank you. On behalf of SBI Life Insurance Company, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.